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What I find interesting is the chart where they estimate daily mining revenue to be on the order of $10 million/day, assuming current prices. Probably, that com

What I find interesting is the chart where they estimate daily mining revenue to be on the order of $10 million/day, assuming current prices. Probably, that computation should be easy to verify using the various Bitcoin websites. Fundamentally, Bitcoin is a transaction ledger. I suspect a ledger supporting the same volume of monetary transactions could be implemented using a single moderately sized server. Even if you calculate with decent margins and fail-overs, the true cost of providing most of the functionality of Bitcoin is more like $1000 per year. (I'm not calculating software development, since the Bitcoin software development also doesn't figure into those $10 million / day). How valuable is the fact that Bitcoin is decentralized and therefore very difficult to control for governments? Is that worth $3000 million per year or more? And is there truly no alternative way to get there that is cheaper in terms of computing power? If you're long BTC, it seems to me that that's what you're betting on. If the answer were No to either of these questions, there would eventually be a correction.

james1071 13y ago
Yes, you have got it in one.
modeless 13y ago
$3000 million is certainly a lot less than the cost of a military powerful enough to defend such a centralized system from government takeover. Also, I think the right comparison is not a hypothetical single server handling transactions, but the current bloated global financial industry. I'll bet $3000 million doesn't even cover the air conditioning bills for the offices of the financial institutions whose jobs would be better handled by Bitcoin.
- nhaehnle 13y ago
  As for the military: That may well be true, but who is willing to spend that kind of money in a sustained fashion just to have a system that is safe from government takeover? Libertarian ideology only gets you so far. Will libertarians put their money where their mouth is? As for the bloated global financial industry, there are two points. First, it does more than just a simple ledger (think the overhead of dealing with fraud in a way that people are willing to accept). Second, it's plausible that Bitcoin will help de-bloat the financial industry, at least the payment services part, and that would certainly be welcome. That doesn't mean that Bitcoin will survive in the long run, though.
runeks 13y ago
> And is there truly no alternative way to get there that is cheaper in terms of computing power? If you discover one then please let us know. Right there there is no known alternative to proof-of-work when trying to reach consensus in a distributed system.
- maxerickson 13y ago
  There's no proof that you need a distributed system to have a reliable public ledger. There is at least some chance that a big awful corporation is more trustworthy than a plurality of miners.
  - runeks 13y ago
    > There is at least some chance that a big awful corporation is more trustworthy than a plurality of miners. Definitely. But it's about central points of failure, not trustworthiness. The trustworthiness of a company is irrelevant if the government decides to confiscate all its assets.
    - maxerickson 13y ago
      For people doing transactions, I'm pretty sure trustworthiness is what it is about. Very few people in the US or EU have concerns about the government seizing assets held on their behalf (you can reply that they should have such concerns, but as a practical matter they do not).
- foobarqux 13y ago
  Peercoin (eventually) uses proof of stake.
  - runeks 13y ago
    Bitcoin developer gmaxwell disagrees: https://news.ycombinator.com/item?id=6798997 https://news.ycombinator.com/item?id=6798997 > In PoW when you attempt to mine you must expend energy and so you should only mine on a consensus which is likely to be the surviving one if you want your work to not be wasted. In PoS the same is not true, and an optimally rational PoS miner will attempt to concurrently mine all forks which he does not hate. > Originally the signed blocks in PPC were supposed to be a bootstrap mechanism until most of the mining was PoS based, but then some clever miner started mining many possible histories and finding ones where he magically got lucky and his coins were the selected stake for all the blocks.
gwern 13y ago
> What I find interesting is the chart where they estimate daily mining revenue to be on the order of $10 million/day, assuming current prices. Probably, that computation should be easy to verify using the various Bitcoin websites. One thing I like to point out is that right now mining is over-subsidized by the basic protocol: why is the block reward 25btc (or whatever it is now)? It's completely arbitrary and is paying the miners more than their services are worth (hence the arms race to earn as much of the reward as possible). The point of mining is to secure the blockchain and render it infeasible to perform double-spends, right? But double-spends are not that disastrous: a few double-spends are an inconvenience and not a disaster for Bitcoin. There is no need to allocate 25btc a block to achieve the current record of close to zero successful double-spends. It is wasteful. So as the block reward declines, we'll see more reasonable amounts of revenue flowing to miners and hence also a decline in how much computing power (electricity) is spent, eventually converging on what is optimal for securing the blockchain.
- retr0rocket 13y ago
  are you retarded? 25btc is just an arbitrary number and thats why it can't be too high, it use to be fractions of a penny. now its 25k because that is how much that work is considered to be worth. the end.
- technofinance 13y ago
  double-spends are not that disastrous? You've go to be out of your mind. If your bank or credit card allowed you to double spend your account they would be out of business very very quickly. Same thing applies to cryptocurrencies.
  - gwern 13y ago
    Are you sure you understand how double-spends in Bitcoin work? If you did, the right response would not be to double-down and engage in false dichotomies where a single double-spend of any transaction ever is a 100% disaster, and instead, adopt the more nuanced perspective that a few double-spends will not kill the currency, will save vast amounts of computational resources, and users can opt into however much security they require by waiting an appropriate number of confirmations.

james1071 13y ago

Yes, you have got it in one.

modeless 13y ago

$3000 million is certainly a lot less than the cost of a military powerful enough to defend such a centralized system from government takeover. Also, I think the right comparison is not a hypothetical single server handling transactions, but the current bloated global financial industry. I'll bet $3000 million doesn't even cover the air conditioning bills for the offices of the financial institutions whose jobs would be better handled by Bitcoin.

nhaehnle 13y ago
As for the military: That may well be true, but who is willing to spend that kind of money in a sustained fashion just to have a system that is safe from government takeover? Libertarian ideology only gets you so far. Will libertarians put their money where their mouth is? As for the bloated global financial industry, there are two points. First, it does more than just a simple ledger (think the overhead of dealing with fraud in a way that people are willing to accept). Second, it's plausible that Bitcoin will help de-bloat the financial industry, at least the payment services part, and that would certainly be welcome. That doesn't mean that Bitcoin will survive in the long run, though.

runeks 13y ago

> And is there truly no alternative way to get there that is cheaper in terms of computing power? If you discover one then please let us know. Right there there is no known alternative to proof-of-work when trying to reach consensus in a distributed system.

maxerickson 13y ago
There's no proof that you need a distributed system to have a reliable public ledger. There is at least some chance that a big awful corporation is more trustworthy than a plurality of miners.
- runeks 13y ago
  > There is at least some chance that a big awful corporation is more trustworthy than a plurality of miners. Definitely. But it's about central points of failure, not trustworthiness. The trustworthiness of a company is irrelevant if the government decides to confiscate all its assets.
  - maxerickson 13y ago
    For people doing transactions, I'm pretty sure trustworthiness is what it is about. Very few people in the US or EU have concerns about the government seizing assets held on their behalf (you can reply that they should have such concerns, but as a practical matter they do not).
foobarqux 13y ago
Peercoin (eventually) uses proof of stake.
- runeks 13y ago
  Bitcoin developer gmaxwell disagrees: https://news.ycombinator.com/item?id=6798997 https://news.ycombinator.com/item?id=6798997 > In PoW when you attempt to mine you must expend energy and so you should only mine on a consensus which is likely to be the surviving one if you want your work to not be wasted. In PoS the same is not true, and an optimally rational PoS miner will attempt to concurrently mine all forks which he does not hate. > Originally the signed blocks in PPC were supposed to be a bootstrap mechanism until most of the mining was PoS based, but then some clever miner started mining many possible histories and finding ones where he magically got lucky and his coins were the selected stake for all the blocks.

gwern 13y ago

> What I find interesting is the chart where they estimate daily mining revenue to be on the order of $10 million/day, assuming current prices. Probably, that computation should be easy to verify using the various Bitcoin websites. One thing I like to point out is that right now mining is over-subsidized by the basic protocol: why is the block reward 25btc (or whatever it is now)? It's completely arbitrary and is paying the miners more than their services are worth (hence the arms race to earn as much of the reward as possible). The point of mining is to secure the blockchain and render it infeasible to perform double-spends, right? But double-spends are not that disastrous: a few double-spends are an inconvenience and not a disaster for Bitcoin. There is no need to allocate 25btc a block to achieve the current record of close to zero successful double-spends. It is wasteful. So as the block reward declines, we'll see more reasonable amounts of revenue flowing to miners and hence also a decline in how much computing power (electricity) is spent, eventually converging on what is optimal for securing the blockchain.

retr0rocket 13y ago
are you retarded? 25btc is just an arbitrary number and thats why it can't be too high, it use to be fractions of a penny. now its 25k because that is how much that work is considered to be worth. the end.
technofinance 13y ago
double-spends are not that disastrous? You've go to be out of your mind. If your bank or credit card allowed you to double spend your account they would be out of business very very quickly. Same thing applies to cryptocurrencies.
- gwern 13y ago
  Are you sure you understand how double-spends in Bitcoin work? If you did, the right response would not be to double-down and engage in false dichotomies where a single double-spend of any transaction ever is a 100% disaster, and instead, adopt the more nuanced perspective that a few double-spends will not kill the currency, will save vast amounts of computational resources, and users can opt into however much security they require by waiting an appropriate number of confirmations.